Manhattan Investment Fund allegedly continued to report gains even though it was incurring losses.

According to today’s Financial Times, the class action lawsuit filed in the US district court of Manhattan on behalf of Cromer Finance, alleges Deloittes, Bear Stearns and Fund Adminstration Services (Bermuda) – an affiliate of Ernst & Young – allowed the head of the fund, Michael Berger, to engage in fraudulent activity costing investors about $350m (£221.5m).

Deloittes reacted to accusations that, as auditors, they had recklessly overlooked the losses by saying the allegations were baseless.